Total debt, excluding mortgages, reached £94.7bn between 2008 and 2010, as economic downturn began to take its toll
The average household owed £3,200 on credit cards, overdrafts or loans as the economic downturn gathered pace, and half of all households believed their debt was a burden, according to a wide-ranging study by the Office for National Statistics.
The ONS’s Wealth and Assets survey looked at the change in household debt between 2006-08 and 2008-10, as the UK entered the grip of recession.
It showed that total debt outside of mortgages reached £94.7bn between 2008 and 2010, and that debt levels increased everywhere in the UK except London between 2006-08 and 2008-10.
Just over half of households had some form of financial debt, with the median amount being borrowed increasing by £400 to £3,200 between 2006-08 and 2008-10.
The ONS categorises household financial debt as credit and store cards that are not settled each month, overdrafts and all forms of fixed-term loans – but not mortgages.
It said the total debt burden for UK households rose by 10.3% between 2006-08 and 2008-10. During that time only Londoners didn’t take on any more debt, but in the north-west debt rocketed by 41.7% and in the East Midlands it increased by a third.
Households in the south-east had the highest household debt, at £4,200, while Welsh households had the least debt (£2,000).
Howard Archer, chief economist at IHS Global Insight, said: “It seems reasonable to suspect that household debt has risen further since 2008-10, with people’s purchasing power being squeezed by extended weak income growth and elevated inflation.”
People living in the least wealthy households were 13 times more likely to regard their financial debt as a heavy burden as those in the wealthiest households. Households headed by younger people owed the most, while those with over 65-year-olds had the lowest proportion of financial liability.
Lone parents were most likely to have financial liabilities (73.7%), but they also had the lowest average household debt at £1,600; whereas married or cohabiting households under the state pension age with no children had the most debt, at an average £5,500.
A spokesman for the StepChange debt charity, said: “That there has been an increase in the number of people considering their debts a burden should come as little surprise. People have seen their incomes stagnate in recent years, while the cost of living has continued to rise, placing the finances of many households under unbearable strain.
“The assets to liabilities ratio of the lowest-income households highlights the dangers that this group face in the current climate. Those on the lowest income will almost certainly be more at risk to changes in financial circumstances and vulnerable to debt”.
The report was published on the same day that the charity Christians Against Poverty said it expects its free debt counselling service to experience its busiest day on record.
The charity says Mondays are the most common day of the week to seek help, and January 30 2012 was its peak day. More than half of callers had priority debts such as outstanding fuel bills, as well as credit cards and loans; and 38% were in arrears with rent and mortgage payments.
The charity’s chief executive, Matt Barlow, said: “Our phone lines will be very busy this month, as ever, and while some will have overspent during past Christmases, their stories reflect a toxic mixture of unexpected life events like job loss, relationship breakdown and illness over a long period of unenviable stress.”